Lucy Battersby

TAMARA Hetaraka thought she knew how her $49-cap mobile phone plan would operate. After several trips to a Vodafone store to collect advertising material and talk to staff, she dragged her mother along to sign her up for a 12-month plan that included a Nokia X8 smartphone.

It is now a year later and Tamara says she exceeded the $49 cap nearly every month of her contract and still does not know why. The worst month cost an extra $350.

''[My mother's] phone did the same thing too, so none of us understood what was going on. But it cost more to end the contract than to just pay it,'' Tamara says.

The problems occurred because 17-year-old Tamara signed up for a plan she did not properly understand and continued with it because she was unable to use Vodafone's self-help services. For example, she could not contact Vodafone to ask about the high bills as the contract was in her mother's name, and her mother did not give her the account password to enable her to set up online billing services.

She says the phone number that Vodafone provides to check account balances cost 60¢ every time she called it, and sometimes it said she had credit available but she would still receive a large bill at the end of the month.

Tamara says the name of the product - a $49 cap - confused her because she thought ''cap'' meant a $49 limit, as it does with prepaid mobile plans. ''They have the prepaid cap where you can't go over and they have the postpaid cap where you can. I thought it would be the same,'' she says.

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Tamara's experience is not unique but helps demonstrate why the Australian Communications and Media Authority, the federal regulator for the telecommunications industry, wants to ban telcos from using confusing words in advertising material. This is just one of many recommendations to come out of an 18-month inquiry by ACMA into customer service in the communications industry. The results were released last month.

ACMA chairman Chris Chapman announced the Reconnecting The Customer inquiry in April 2010 as a way to make sure all the new technology and communications services ''actually work in Australia's public interest'' and in response to increasing numbers of complaints about telecommunications providers.

''Yes, consumers need to take responsibility for their actions and commitments. But as we have seen in the US subprime crisis, when no one is connecting the dots and declaring enough is enough, everyone gets hurt,'' Chapman said at the time.

''The US subprime market is, of course, in a different country, in a different industry and in a different marketplace - but its complexity, disintermediation and global footprint have strong analogies to the modern telecommunications marketplace.''

When ACMA announced the inquiry, consumers responded by saying it was long overdue.

''If you don't act incisively in bringing 'the most hated industry in Australia' to account now, the Australian public will have to endure this whole futile exercise again in a few years time, no doubt at considerable expense to the taxpayer,'' Optus customer Peter Gough wrote in his submission.

A Sydney barrister, Peter Semmler, QC, told ACMA of his experience trying to get the broadband connection reinstated at his home.

''I consider it completely unsatisfactory that I had to spend many frustrating hours speaking to several different unaccountable and largely unhelpful people in call centres and then searching the internet for clues as to how I might be able to contact someone in [a senior] position to resolve a problem which, in essence, was one of bureaucratic buck passing between TPG and Telstra and which, after 10 days, was assuming Kafkaesque characteristics,'' he wrote.

More customers have approached The Age with stories of immense frustration that phone bills cannot be explained or that promises from telcos are broken.

The inquiry found that the current system of regulating consumer service - in which telcos collectively write their code of conduct and then self-regulate - is no longer working. It found that many marketing practices within the telco sector are too confusing or complex for customers to make good decisions.

However, ACMA also found that the current code does not force the telcos to reveal the kind of information that would help consumers make better choices. For example, ACMA believes customers should know how many complaints each company receives from its customers, how many customers each company has, how many complaints are resolved on the first call, and the average length of time it takes to resolve a complaint.

Currently, the only figures available are the number of complaints made against a company to the Telecommunications Industry Ombudsman.

ACMA would also like to see higher standards of dispute resolution and internal complaints handling. For example, the industry should adopt the same definition of ''complaint'' as other companies. And, importantly for travellers, it would like telcos to warn new customers about the high cost of using mobile phone roaming overseas.

ACMA has given the industry five months to rewrite its self-regulatory code to improve standards of customer service. If it feels the new code does not do this, it will write a tougher regulatory document called a standard - court-enforceable with fines of $250,000 per breach.

To their credit, the big mobile carriers are introducing more ways for customers to track account updates from their smartphone or receive text alerts when they are running out of free calls, texts or data.

And many already offer online self-service facilities so customers can access and adjust their account at any time.

Carriers also point out that unlike other utilities and businesses, their industry constantly introduces consumers to new and unfamiliar technology and applications, which can cause confusion.

But consumer groups say it is a carrier's responsibility to provide products that consumers can understand and use without getting into financial trouble.

Teresa Corbin, chief executive of the Australian Communications Consumer Action Network (ACCAN), says Australian telcos are not putting as much effort into customer service as those overseas.

''The reality is that, yes, telecommunications equipment is complex. However, the actual plans and products you design around that equipment and those services do not have to be complex,'' she says.

''In other countries they are also marketing exactly the same products and they don't have the same number of complaints and they don't have the same confusing advertising or the same confusing products.''

Corbin says ACCAN will work with the telco companies on the new voluntary consumer protection code.

But if so many people believe service in the telco sector is so bad, why don't they walk away as customers do when they encounter poor service in other sectors such as retail or hospitality?

The main reason is that many have contracts they cannot break without paying a cash penalty. Most customers enter contracts to get a mobile phone, which they then pay off over one or two years. Or they have bundled several products together with one provider and cannot leave without all their services being affected.

A survey of 2520 people by ACMA found that only 6 per cent of those who considered switching providers did so. This was because ''there was a perceived inability to switch customer service providers, either due to a contract or the provider having the only reliable coverage in the local area'', the survey found.

ACMA also asked behavioural economist Professor Patrick Xavier to investigate why unhappy customers stay with a provider or sign up to contracts with companies that receive a lot of complaints.

While Xavier found contracts did influence choice, so did ''endowment'' - staying with a provider out of misplaced loyalty - or ''default inertia'', when ''making a decision to opt out takes more effort than to opt in'', he explains.

''The basic problem in many markets is 'information asymmetry' - service providers have more information than consumers,'' Xavier wrote in his report. However, customers will never get better service unless they ask for it, are willing to change companies and are willing to pay for it, he says.

''Indeed, because [the company] needs to charge a higher price to cover the higher cost of better quality service, it either loses market share or it retains market share but with a lower profit margin. In the longer term, it will seem to make economic sense to simply let customer service decline,'' he wrote.

There are many reasons why customers complain. Tamara Hetaraka's problem was a lack of information when she signed on to a plan, while Peter Semmler's problem was that promises were not followed up.

Sometimes a simple complaint can become more complex and infuriating the longer it remains unresolved.

For example, David Tonkin, former chief executive of travel.com and lastminute.com, told The Age he was a happy Vodafone customer for 14 years until last July, when 70 per cent of his mobile phone calls started dropping out at his home and office in Byron Bay.

When he visited a local Vodafone store and asked to be let out of his contract, he was handed a telephone with an Indian call centre employee on the other end. Tonkin says he was promised three months' credit if he stayed with Vodafone, and if at the end of the three months he wasn't happy he could leave without paying a break fee.

Three months later he visited a Vodafone store in Adelaide to terminate the contract. The store manager again put him on to the Indian call centre, which, he says, then reneged on the promise to let him leave Vodafone without paying a penalty.

''I have been trying to run three businesses in Sydney and I have two parents with dementia in Adelaide. It [has] become a personal thing [because] I fly to Adelaide each week to care for my parents, not to waste precious time arguing with someone in India,'' he says.

''They make it so difficult for you to change carriers or to get out of contract.''

Internal emails from Vodafone employees about Tonkin's case show the break fee will be waived only if the company's technical department confirms there are network problems at the customer's house. While sales staff might want to help Tonkin, they are constrained by the technical department.

''To get to the stage where a company as big as Vodafone can't provide assistance in a retail store in Australia to help a customer who has serious problems … is shocking,'' Tonkin says.

Vodafone released Tonkin from the contract without a fee a few days after it was contacted by The Age about his case.

The experience of librarian Judith Wakeman is a measure of how bad the customer service of telcos can be. Wakeman, who has degrees in mathematics and computer science, has lodged a complaint against Telstra with the telecommunications ombudsman because she says she was treated poorly when she contacted Telstra with a simple inquiry about her phone bill.

She noticed that a 5 per cent discount on her monthly landline bill was not being credited to her mobile phone bill as promised when she agreed to bundle the two services together several years ago.

She expected her bill to show a refund but suspects the amount was instead deducted from her monthly credit limit.

''It may be that they are giving me the money back, but I could not work that out,'' she says.

While the amount is insignificant she was concerned it could be evidence of fraud or a third party skimming her discount.

She says Telstra call centre staff frustrated her with a ''condescending and aggressive'' manner and failed to answer her questions or resolve the problem.

A spokeswoman for Telstra says the company is working to improve its standards of customer service.

''We need to improve customer service by making it faster, easier and simpler for customers to deal with Telstra. This is a top priority and we've been investing and making changes for the past two years. While improvements are being made, we know that we still have a long way to go,'' she says.

ACMA agrees that the telecommunications industry has a long way to go to improve customer service and is strongly encouraging companies to lift their standards.

''There should be no misunderstandings about ACMA's determination to materially improve telco consumer service,'' says Chapman.

''We expect and we look forward to seeing the sector strongly embrace the changes detailed in the final report.''